Airbus says U.S. move robs Boeing of tactical edge

July 02, 2012|Tim Hepher | Reuters

Airbus CEO Fabrice Bregier (L) shakes hands with Alabama Governor Robert Bentley during a news conference in Mobile, Ala. European planemaker Airbus held a news conference to announce that they will construct an assembly plant for their A320 in Mobile. The plant will give Airbus its first assembly site in the United States. (Jonathan Bachman/Reuters)

PARIS (Reuters) - When it comes to selling jets to domestic U.S. airlines, Boeing may just have lost the precious ability to make the crucial "last phone call," according to the sales chief of its rival Airbus.

John Leahy, a determined New Yorker who helped make Airbus the world's largest civil jetmaker, forged his career by winning over the boards of U.S. carriers but failed to win the same market success in his homeland as he did globally.

Airbus has almost 20 percent of the U.S. market, the largest for jets like the A320 and Boeing's 737, the backbone of most airline fleets, compared with a global market share of 53 percent.

On Monday, Airbus announced plans to build its first U.S. assembly line in Alabama with a goal of prising open the lucrative replacement market for older jets.

Airbus and Boeing compete for jet sales worth almost $100 billion annually and nowhere more fiercely than in the medium-haul segment, where they enjoy a virtual duopoly, unlike the market for larger jets where Boeing has an edge.

Airbus hopes its presence in the United States will add the capacity to respond to extra market demand but also allow the European company to play the U.S. jobs card whenever that helps.

"I haven't found an airline CEO yet in the U.S. who thought building airplanes there was a bad idea," Leahy told Reuters.

"Virtually everyone has said this is game-changing and fantastic and takes a lot of pressure off them, because all things being equal, if you buy the Airbus airplane you have got to explain to your congressman and politicians and unions ... Well now you can say 'Hey, I just bought the plane from Alabama.'"

Analysts say the United States is not widely regarded as a market where national identity plays a big part because airlines are so focused on carving out savings in the operating costs.

Boeing's 80 percent U.S. market share in narrowbody jets is also said to reflect the 737's incumbency stretching back more than 40 years.

Both manufacturers claim their aircraft are cheaper to operate.

But Leahy said he had sometimes found himself outmaneuvered when talks went down to the wire and Boeing was, according to him, awarded the all-important last move in a close negotiation.

"I think we just leveled the playing field here. I don't think Boeing is entitled to that last call any more," he said. He declined to discuss examples where he felt Boeing had won customers by calling in favors based on its nationality.

Boeing was not immediately available to comment.

Aircraft like the A320 or 737 carry list prices of $80 million to $90 million but are usually offered at discounts whose size is a closely guarded industry secret. Still, given the volumes involved, big deals can stack up in tens of billions of dollars.

MARKET SHARE

Airbus estimates U.S. airlines will need 4,600 single-aisle planes like the A320 or 737 worth more than $300 billion over the next 20 years. Boeing will update projections on Tuesday.

In France, union sources said Tom Williams, executive vice president for programmes, had briefed them that Airbus aimed to double U.S. market share to 35 percent but gave no time frame.

An Airbus spokesman said such a progression made sense based on the experience of an Airbus assembly line in China but that it did not represent a formal target.

Leahy said the plant would increase Airbus's market share in the United States by more than a few percentage points.

Airbus produces 40 single-aisle aircraft a month and aims to reach 42 by end-year, having suspended earlier plans to move quickly up to 44 a month amid Europe's debt crisis.

Output in the United States and China must fit within the total target, but Airbus said there is enough room for growth to allow the Alabama line to move up to its initially planned level of four a month without causing disruption.

Airbus Chief Executive Fabrice Bregier told reporters in Alabama he would not be surprised if the overall production rate went up to 46 a month once the line was up and running.

Leahy said he expected revamped models of A320 coming to market from mid-decade would eventually sustain output above 50.

Airbus says the overall cost of assembling at the U.S. plant will be the same as in Europe but that it hopes to benefit from reduced exposure to swings in the value of the dollar. (Additional reporting by Karen Jacobs; Editing by Steve Orlofsky)